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Tax Day - expert comment from Dr Arun Advani

Dr Arun Advani, Assistant Professor of Economics at the University of Warwick and Impact Director, CAGE comments on "tax day."

"Though it will hardly have been the story newspaper editors were waiting to break, tax nerds were promised a mega "tax day" today, with a number of tax consultations being published together. In principle this looked like a fantastic move: a chance to move away from piecemeal reforms and tinkering around the edges, and put together a comprehensive package of possible changes that would solve existing problems while tackling the yawning budget deficit.

"Instead we got a snooze-fest, even by tax standards: some worthy points on tax administration, through more much-needed investment in digital, reducing the need to fill zero-tax inheritance tax forms, and finding ways to get self-assessment tax payers to pay more regularly throughout the year. Similarly some more steps on reducing non-compliance, though nothing that would increase access to third party information which is still lagging at HMRC relative to some other tax authorities.

"The big misses were anything substantial on the environment, the taxation of capital gains, and the taxation of different forms of income. On the environment, there were potentially steps backwards: in the name of keeping the UK together, the government is considering reducing Air Passenger Duty - the tax on flying. While there certainly are challenges in the relationship between Scotland and Westminster, I'm not convinced that making flying from Edinburgh to London is really what nationalist supporters are looking for.

"A rise in capital gains tax has been expected for a while, since the Chancellor announced a review of CGT last summer. There is clear evidence that by value this is concentrated among a small number of people, and that it contributes to huge disparities in the amount of tax paid by otherwise similar people.

"The first report from the Office for Tax Simplification recommended a move towards aligning the rate of CGT with income tax rates, as Nigel Lawson did as Chancellor in 1988; something that would not only fix these problems but also raise around £14bn. So it is something of a surprise to see nothing on this. The question is whether this means the Treasury are planning to make this reform without consultation in Sept, or whether the idea has been killed off.

"Finally, there is an ongoing problem, that essentially everyone working on personal tax has at some point written about - that whether you are employed, self-employed or employed through your own company has significant effect on the amount of tax you pay even with the same gross income. It is a matter of ongoing frustration to those in tax, and unfairness to those in employment, that the government continue to ignore this issue."

23 March 2021